Green Investment Bank

Sir Adrian Montague CBE, is Deputy Chair of the UK Green Investment Bank. He is also the non-executive Chairman of 3i, Michael Page International plc, Anglian Water Group Ltd and CellMark Investments AB of Gothenburg. and a non-executive director of Skanksa AB of Stockholm. He is well known and respected in the City, and has a great deal of experience of working with the public sector

The Green Investment Bank is a genuinely radical innovation. The use of government credit support for nationally significant projects has been around for a while, but usually as a response to some crisis rather than as a policy tool of more general application. For example, when I was in the Treasury in the late 90s, I was responsible for nurturing the reconstruction of the Channel Tunnel Rail Link (now HS1, whose proceeds will, in a nice twist of fate, part fund the GIB) by using government guarantees to rescue a failed private sector concession. But now, in a new, permanent institution, the GIB brings essentially the same toolkit to bear on the most important strategic sector in the UK today, that of marrying the vitally needed new investment in the nation’s energy infrastructure with the Government’s commitment to develop Britain into a leader in the worldwide green economy. So it is both a privilege, and an irresistible opportunity, to have been asked by the Secretary of State to chair the new institution’s Advisory Board.

The keys to the GIB’s success are going to be precise targeting and brilliant execution.

Precise targeting, not just because we’ll have to show the Treasury and the state aids people in Brussels that the GIB is focussed on clear examples of market failure, but also because it makes sense in these straitened times to make every penny of public sector support count. The GIB’s mission is to lubricate, not to substitute for private sector investment. So the ratio of GIB support to private sector funds mobilised is a key metric.

And brilliant execution needs to be GIB’s watchword because the eyes of the world will be on it – not just the Treasury and the PAC, but also industry and the City, and more broadly policymakers around the world seeking to implement and expedite green initiatives in their own economies. The GIB’s got to build a reputation, quickly, for knowing what it’s about and harnessing top notch deal-doing skills. There must be no confusion about what’s in scope and what’s not, and it’s got to drive its chosen deals with real energy and professionalism, as sceptics will be on the look out for evidence of confusion in the mandate or suggestions that the GIB is a soft touch.

The heart of GIB’s investment policy lies in the principle that it’s going to have a “double bottom line”, that is, in the projects it supports it’s going to be seeking both an acceptable financial return and an environmental dividend in the form of accelerated investment in green projects. The devil is in the detail here, so this is where much of the early work is going to be concentrated.

The scope of the new bank’s activities has been pretty widely debated, so it’s important to be clear that the sectors it will prioritise are offshore wind, non-domestic energy efficiency and some waste projects. I’m quite well known in the Department from my days as Chairman of British Energy, and therefore we also need to be clear that nuclear projects are not on the list.

My first task is to advise the Secretary of State on the membership of the Advisory Board. My initial impressions are that we need a balance of energy industry credentials, hands-on financing experience, an understanding of the new technologies and some background in starting up new credit institutions. It’s a tall order to bring together a good slate like that but we’ll see what we can do. The GIB needs the best people in order to get off to a flying start.

Well, that’s my brief introduction to how I see my role at GIB. I’ll follow up this blog with others as the weeks go and GIB starts to take more tangible shape. Do let me have your comments and I will try to reply to each one of them personally.

Cheers, Adrian Montague.

8 Responses to Green Investment Bank

Firstly, congratulations on your appointment. Secondly, can you be clear about whether or not GIB will also be targeting support towards large-scale coastal wood chip & wood pellet biomass power projects like those developed by MGT Power (www.mgtpower.com)? Since these are large renewable energy projects (each of the UKs proposed 300MWe projects having the same output as the worlds largest proposed offshore wind farms), are cheaper than offshore wind (ie receive only 1.5 ROCs compared with the 2-3 expected for offshore wind), are widely recognized as achieving c90% carbon reduction compared to gas or coal fired power, and there is clear evidence of market-failure, ie the projects are still not being constructed in spite of compelling economics, surely its about time that Government institutions like yours signaled clear support for them?

We look forward to the successes of the Green Investment Bank and its offspring!

Reading the press release it appears that “rapid progress” in delivering the aims and objectives of the Green Bank will result in a start date post April 2012. In the meantime 10 low carbon R&D match funded projects approved last year by Carbon Trust have been terminated by CT. The reason: Funding has been withdrawn by DECC to Carbon Trust. These very significant projects must now hang in the balance whilst the applicants scramble to unwind partnership commitments and search for additional support. Or perhaps these projects, so highly rated by Carbon Trust will find a route abroad. The” Valley of Death” for developers of low carbon and marine renewables will continue to claim victims unless a half way house can be found to encourage joined up thinking from BIS/DECC, perhaps, with a strong steer this is something the Green Bank could take on now? Rapid progress really is needed. Your views would be most helpful,
Yours,
Paul Auston, Chairman, Checkmate Seaenergy, http://www.checkmateuk.com/seaenergy

Congratulations on your appointment. I read your blog with some interest, particularly with reference to targeting, guarantees and value-for-money. In the light of the probable increase in pension saving from next year (and hence the need for pension funds to find an investment home for those funds), the EIB’s current project to encourage infrastructure and recent comments by Katrina Haley of HSBC on project bonds at an IPFA conference, do you think the Green Investment Bank could most effectively deploy at least some of its resources in providing a form of financial guarantee for the right projects (or portfolio of projects), providing credit enhancement that the private sector is no longer in a position to provide?

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